Tuesday, June 13, 2017

Nothing is as permanent as we imagine--especially super-complex, super-costly, super-asymmetric and super-debt-dependent state/financial systems.

Identifying the tell-tale signs of Imperial decay and decline is a bit of a parlor game. The hubris of an increasingly incestuous and out-of-touch leadership, dismaying extremes of wealth inequality, self-serving, avaricious Elites, rising dependency of the lower classes on free Bread and Circuses provided by a government careening toward insolvency due to stagnating tax revenues and vast over-reach--these are par for the course of self-reinforcing Imperial decay.

Sir John Glubb listed a few others in his seminal essay on the end of empires The Fate of Empires, what might be called the dynamics of decadence:

(a) A growing love of money as an end in itself.

(b) A lengthy period of wealth and ease, which makes people complacent. They lose their edge; they forget the traits (confidence, energy, hard work) that built their civilization.

(c) Selfishness and self-absorption.

(d) Loss of any sense of duty to the common good.

Glubb included the following in his list of the characteristics of decadence:

-- an increase in frivolity, hedonism, materialism and the worship of unproductive celebrity (paging any Kardashians in the venue...)

-- a loss of social cohesion

-- willingness of an increasing number to live at the expense of a bloated bureaucratic state

Historian Peter Turchin, whom I have often excerpted here, listed three disintegrative forces that gnaw away the fibers of an Imperial economy and social order:

To these lists I would add a few more that are especially visible in the current Global Empire of Debt that encircles the globe and encompasses nations of all sizes and political/cultural persuasions:

1. An absurdly heightened sense of refinement as the wealth of the top 5% has risen so mightily as a direct result of financialization and globalization that the top .1% has been forced to seek ever more extreme refinements to differentiate the Elite class (financial-political royalty) from financial nobility (top .5% or so), the technocrat class (top 5%), the aspirant class (next 15%) and everyone below (the bottom 80%).

Now that just about any technocrat/ member of the lower reaches of the financial nobility can afford a low-interest loan on a luxury auto, wealthy aspirants must own super-cars costing $250,000 and up.

A mere yacht no longer differentiates financial royalty from lower-caste financial Nobles, so super-yachts are de riguer, along with extremes such as private islands, private jets in the $80 million-each range, and so on.

Even mere technocrat aspirants routinely spend $150 per plate for refined dining out and take extreme vacations to ever more remote locales to advance their social status.

Examples abound of this hyper-inflation of refinement as the wealth of the top 5% has skyrocketed.

2. The belief in the permanence of the status quo has reached quasi-religious levels of faith. The possibility that the entire financialized, politicized circus of extremes might actually be nothing more than a sand castle that's dissolving in the rising tides of history is not just heresy--it doesn't enter the minds of those reveling in refinement or those demanding more Bread and Circuses (Universal Basic Income, etc.)

3. Luxury, not service, defines the financial-political Elites. As Turchin pointed out in his book on the decline of empires, in the expansionist, integrative eras of empires, Elites based their status on service to the Common Good and the defense (or expansion) of the Empire.

While there are still a few shreds of noblesse oblige in the tattered banners of the financial elites, the vast majority of the Elites classes are focused on scooping up as much wealth and power as they can in the shortest possible time, with the goal being not to serve society or the Common Good but to enter the status competition game with enough wealth to afford the refined dining, luxury travel to remote locales, second and third homes in exotic but safe hideaways, and so on.

4. An unquestioned faith in the unlimited power of the state and central bank.The idea that the mightiest governments and central banks might not be able to print their way of our harm's way, that is, create as much money and credit as is needed to paper over any spot of bother, is unthinkable for the vast majority of the populace, Elites and debt-serfs alike.

That all this newly issued currency and credit is nothing but claims on future production of goods and services and rising productivity never enters the minds of the believers in unlimited state/bank powers. We have been inculcated with the financial equivalent of the Divine Powers of the Emperor: the government and central bank possess essentially divine powers to overcome any problem, any crisis and any conflict simply by creating more money, in whatever quantities are deemed necessary.

If $1 trillion in fresh currency will do the trick--no problem! $10 trillion? No problem! $100 trillion? No problem! there is no upper limit on how much new currency/credit the government and central bank can create.

That there might be limits on the efficacy of this money-creation never enters the minds of the faithful. That pushing currency-credit creation above the limits of efficacy might actually trigger the unraveling of the state-central bank's vaunted powers never occurs to believers in the unlimited reach of central states/banks.

The possibility that the central state/bank's powers are actually quite limited is blasphemy in an era in which the majority of the Elites and commoners alike depend on the "free money" machinery of the central state/bank for their wealth and livelihoods.

It is instructive to ponder the excesses of private wealth and political dysfunction of the late Roman Empire with the present-day excesses of private wealth and political dysfunction. As Turchin and others have documented, where the average wealth of a Roman patrician in the Republic (the empire's expansionist, integrative phase) was perhaps 10-20 times the free-citizen commoner's wealth, by the disintegrative, decadent phase of imperial decay, the Elites held wealth on the scale of 10,000 times the wealth of the typical commoner. Elite villas were more like small villages centered around the excesses of luxury than mere homes for the wealthy and their household servants. Here is a commentary drawn from Turchin's work:

"An average Roman noble of senatorial class had property valued in the neighborhood of 20,000 Roman pounds of gold. There was no 'middle class' comparable to the small landholders of the third century B.C.; the huge majority of the population was made up of landless peasants working land that belonged to nobles. These peasants had hardly any property at all, but if we estimate it (very generously) at one tenth of a pound of gold, the wealth differential would be 200,000! Inequality grew both as a result of the rich getting richer (late imperial senators were 100 times wealthier than their Republican predecessors) and those of the middling wealth becoming poor."

We can be quite confident that these powerful elites reckoned the Empire was permanent and its power to secure their wealth and power was effectively unlimited. But alas, their fantastic wealth vanished along with the rest of the centralized, over-extended, complex and costly Imperial structures.

There is a peculiarly widespread belief that Elites are so smart and powerful that they always manage to evade the collapse of the empires that created and protected their wealth. But there is essentially no evidence for this belief when eras truly change.

Yes, Elites have proven to be adept at shifting with the political winds; thus the guestbooks of French chateaux were filled with the names of Nazi dignitaries during the German occupation of France, and with the names of Allied bigwigs after the war ended the 1,000-year Reich.

But the complete collapse of the financial system and centralized power is not a war or financial crisis--these are storm waters which the Elites have the wherewithal to survive. But when a tsunami disintegrates the entire structure and carries it out to a nameless sea as flotsam and jetsam, there is no transfer of wealth from the Old to the New.

The Roman Elites did not become Barbarian elites who just so happened to own the same villas and vast estates they did when they wore togas and dined on super-refined delicacies. They were pushed aside along with everything that supported their wealth and power.

Nothing is quite as permanent as we imagine--especially super-complex, super-costly, super-asymmetric and super-debt-dependent state/financial systems.

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